LIVE SaaStr AI Day: What's New with AI in SaaS with SaaStr, Synthesia and Theory Ventures

For 2025. We did this last year and with the goal of really doing a deep dive at the intersection of AI and B2B. And luckily for our kickoff today we've got two folks joining us just to have a discussion on what's literally going on today. And I think it's some ways it's so I can't even keep up. We'll talk a little bit about deep. I can't even keep up after deep seek and everything. It felt like a year ago was insane. We've got Victor Ripabelli from CEO of Synthesia. We'll talk, we'll first do a little bit of a deep dive there. Synthesia just raised a big round at two and a half billion or something like that. I mean you gotta, you gotta keep up with OpenAI and I mean that's sort of like a seed round these days, but pretty impressive. We'll dig in a second. But I mean Victor has been at the intersection of AI and B2B and enterprise doing AI based video and training for enterprises. So no one's been thinking about the intersection of the two. Probably more. And Victor was with us in SAS Europa in London last summer. And I'm going to ask him what's changed. And obviously we all know Tamash Tungus from Now Theory Ventures in the last 14 months he's raised just only like $900 million or something across two funds in 14 months or something like that. Is that about right?

A little less than that. Closer to 700.

Okay, well the pace has picked up for AI investors. It used to be that like 60 million was a lot for a first time fund. 50 million now guys like to. Now granted, not a new investor, but a new fund can raise like approaching $1 billion in 24 months to invest in AI and data. I mean honestly, it is a derivative of what's changing, isn't it?

But check sizes are up. I mean lead check sizes are up 42% in 18 months.

Yeah. So I want to dig into that. But I can't think of anyone to talk about right now. The intersection. And I want to go into some of the data with Tomas. But before we get there, Victor, get us up to speed. So you've been doing give me a deep dive on Synthesia and where it wins. But roughly speaking, you've got hundreds of relatively larger customers using, using your AI training. Here's you yourself on the screen, right? Using your own product, doing in many cases, nuts and bolts B2B activities, right? Corporate training, sales training, external on websites, internal SKOs, which we thought we wouldn't need any salespeople with. With AI, it turns out we need more than ever. But you're kind of at the, at the, at the intersection of an area that is competitive, right? There's a, I mean there's more than one vendor doing video and enterprise, but you know, you're, you're on one side or the other of nine figure in revenue monetizing this. So get us up to speed on what you today and actually would be interesting to me is like with all the change, what are you most excited about that you're going to release this year?

Yeah, thanks for having me. So I mean today we were the largest AI video platform for the enterprise, right? And you know, four years ago that all kind of started with avatars. So most of those who are familiar with Synthesia probably think of Synthesia as being like the avatar company. We invented this technology where instead of recording yourself with a camera, you simply create an avatar of yourself or use one of our kind of off the shelf avatars. You type out something and boom, magically a video comes out. Which obviously is 100 times more efficient than having to record yourself and gives you all that, the benefits. You can go back and edit it after the fact, you can translate it into different languages and a whole bunch of other really cool things. And where we've gotten to today is that that is still for sure a very important headline feature of Synthesia. But really we are an AI video platform. Today we help our customers predominantly in the enterprise. We also have a freemium model, self service motion. But the enterprise is what we're focusing on, on communicating better. And that could be with their employees, could be with customers, could be with partners. In 2024, people want to consume their content in video or audio format. They do not want to read anymore, right? It's a lot of tech in enterprise.

It's true.

What we've been very successful at doing is building a video tool, right, which has avatars as a component, as AI, voices as a component, as an AI screen recorder as a component. But everything is sort of put into this Canva PowerPoint style flow, right? And so the reason we're growing so fast is because what we essentially have done is we've enabled any white collar office worker who knows how to make a PowerPoint to make a video. Right? Before Synthesia, you'd have to go to the video production department with your idea. They would have stack rank it against 10 other ideas they'd Say, no, Jason, your idea is not important enough. We'll do what the market team wants to do. And you, you kind of have to go through all that stuff, right? If you did get managed to get a video through and you're doing customer support, then, you know, one month after you've made 20 beautiful customer support videos, they're all out of date because you changed the product name, the policies, they're.

All out of date.

Different. Everything is out of date, right? And that's a horrible thing to change. But with this new platform that we've built, right, you can just go back and edit it after the fact, which is incredibly powerful. And so I think what we've graduated from over the last four years, right, is being the training company with avatars, now being the enterprise video platform. That's what we're building. And the way we think of that is if you look at the video value chain, no one has ever managed to build a really, really big company about enterprise video. And we think the reason for that is that the value chain has been completely disjointed, right? You have a camera where you shoot some content with. You go to Adobe to edit it, you go to Frame IO to collaborate on it. You'd go to Vimeo to then publish that content or maybe YouTube, depending on what your goals are. And what we've done is actually we've collapsed all that into one platform, give you all the tools to make the videos. And it's so easy that anyone can do it. It's a full, modern, collaborative platform, right? It's a content management system where you can, you know, have teams and organizations. Your CIO is happy because we have Audit life, all the sort of stuff you need, right? It's. It's collaborative and you can translate, update the content. Then we also give you a publishing platform, which is a relatively new product for us, but essentially it gives you a video player where you can deliver the content to your end users. And that's exciting because when we own that entire video value chain, we can this year begin to do a lot of things you couldn't do if we hadn't bundled it. For example, we can begin to use the engagement data of the videos to automatically create new versions of the video that perform better than the previous one. We can make your videos interactive, you know, bidirectional communication, which of course is. Think of it as like AI agents, right, where you can. It's not just a video that goes. Plays from A to B. It's kind of like an experience. It's like a small app almost you can interact with. So really what's exciting here is like, is the future of communication which I think you look at people's private lives. Everybody listens to podcasts and watches TikTok videos and YouTube videos. But when we go to work, hit the buying process in as a customer, right when you're receiving support somewhere, all that stuff, text that we're helping customers, we're helping enterprise essentially up level their communications which, which, which drives all sorts of different business outcomes depending on our customers.

So you're saying that folks that have blogged for a while, like Tomas and I were just. It's dead like this. We just, we should just. It's. It's over. It's.

It's the time to hang it up.

Distant past time to hang it up. There actually aren't many bloggers left. Okay, one quick question on this and, and then we can dig in a little bit into today. And I want to. Let's use your round in a second as a case study. Let's you. Let's use it with Tomas. But what is some. With the, with the latest models, latest everything we can talk about Deep seek for a moment in the next. What's something you're excited that you can do this year in an upcoming release that maybe you couldn't even do last year? What is something literally that's at the bleeding edge that you're, that you're doing for real in the enterprise?

So we're launching our new AI video models within the next three to six months. And they're going to be a massive upgrade both in terms of quality and fidelity of the avatar. So those of you who've tried the product will probably have experienced. Avatars are great. They're a lot better the last 12 to 18 months than they were previous to that. But there's still some way to go before it's completely photoreal. Right? We got to pass through that barrier. And we're also going to enable you to basically prompt your avatar into new environments. So for example, if you create an avatar for yourself today, you're kind of stuck wherever you recorded your avatar in your office, for example. What you can do with this new tech is you can say, hey, put me in the jungle, put me in a supermarket, you know, put me like I'm playing tennis or something like that. That opens up an entirely new creative dimension in the product. And so those two things together have always been one of the core mechanisms of Synthesia. Right. The better the quality of the Avatars and voices, the more time we unlock. So a lot of people laughed at us four years ago for going after the training market. And because it's not a very sexy market, VCs hate learning and development. Right?

Oh, well, I get it, but I get it didn't maybe didn't sound like the hottest space. Right. We get. But a midsize. But a midsize market, in all fairness, right. Even. Even it's midsized. Right.

Classically, I, I think more importantly than that, you know, you could get to, you know, double Digigit AR just serving that market. And the thing that we, I think saw that there's so many, you know, graveyard competitors that have died around us over the last eight years was that we focused on a use case where the technology was actually good enough, not where we could dream it to be one day, but doing all sorts of cool marketing and sales content. It worked well for training because the alternative to training was a boring PDF document. And so what we've seen over the last couple of years is that the better the avatar quality becomes, the bigger the TAM gets. So the last 12 to 18 months, we've seen a massive shift towards product marketing and customer support, which collectively those two are now actually the biggest segments that we serve. And that's purely because the quality of the avatars have gotten better and better. We're not making like, you know, we're not making super bowl ads and key brand moments, but make a lot of tactical marketing content. Right? So you, you know, you see the cool ad on, on Meta or YouTube, whatever, you click to the website and then once you're on the website, then you learn more about the product with Synthesia videos and we could just kind of move further and further up that funnel. The better the quality of the advertising voices become.

So the further you, you leave the uncanny valley, the customers can see it and you're seeing more market pull, right?

Exactly.

Yeah. Cool. All right, I want to dig into that a little bit more. But, but, but before we do, just because we. The agenda changed in a week. Deep, Deep seek. Right. I saw a lot of folks talking about this on social media and X. I don't know if you guys did. I want to get both of your opinions, but I. Listen, I'm not an, I'm the least smart person probably of all the folks that are watching, but I have an AI test and I want to know what you got. It's called the Sopranos test and I've been running this for a while. Okay. I'm a basic guy. But. But I do enjoy writing in the word. And I go in and I ask what happens after? Victor, you watch, you watch the Sopranos over there in Europe. Have you seen the show? Probably don't know. Well, anyhow, famous show in the United States and it's crazy. At the end of the Now I. There is a rule, I think after 20 years there's no spoilers, Right? I think that's the rule on Reddit. Okay. So in the very end, the screen goes black. And people have debated this for 20 years. What happens in the last and so I asked, I asked chat GPT and I asked and I, and I asked every. And I asked Claude and I asked Deep sea and Deep sea one. It's the best ending. It was the best ending, right? That doesn't mean that it gives me my best diagnosis for why my cholesterol's high or others, but that was my moment where it's pretty cool. So for, for this one use case, it seemed like instant parody. So first, Tomas, what's your take in general and is this real? I mean, it's only been a couple days, right? Is this going to make B2B apps an order of magnitude cheaper? What's the impact?

I think the impact is, I mean, your gross margins are so much better than they used to be, right? Like, the second biggest cost for AI enabled SaaS applications has been inference. And when we were looking like a typical software company is probably at 75% gross margin. A lot of AI software application companies are like 0 to 30% and now their single biggest cost has been reduced by 95% overnight and they didn't have to do a thing. So now they have AI. And Jason, you and I both know this. Like, the growth rates of AI companies are much faster than say the classic SaaS businesses just because there's so much in them. And so now you have companies that are growing 1 to 7 or some massive growth rate. Before, they used to have challenging gross margins and now they'll probably look the same as SaaS companies, which means you have pretty significant multiple and valuation expansion.

Yeah.

So I think it's, I mean, at the application layer, this is like an unbelievable Christmas present that came on January 22nd.

Yeah. I want to share a story, but Victor will, this is your cogs. Is your cogs a huge issue and is it going to plummet or just from the perspective of Synthesia, is this not as big a deal as it sounds from COGS and the rest, what's your learnings in 48 hours.

I mean, we have great software markets already, so I wouldn't say it's not something we'd like to put a lot of folks in emphasis towards, but obviously as we scale up. Right. It's great. I would say though, I think I totally agree with Thomas. It's a massive technical breakthrough. I think it's interesting when you look at the market. I think if anything, to me this is just confirmation that humans and markets are driven by stories and emotions, not fundamentals. Right. It's absolutely hilarious to see all the world's tech analysts who know nothing about AI just panicking because there's like a new model out. I think people have a tendency to overestimate the impact of this in the short term and maybe underestimate it in the long term. I think the long term tail effect, as Thomas just said, for the application layer is huge. Right. I think that's really massive. But I think in two months, I think 99.9% of the people who are using anthropic and OpenAI today is going to go back to using their products, not Deep Seq's model. And there's a big differentiation between those two. Right. I tweeted the other day that smart people talk about models and benchmarks and customers talk about app flows, apps and workflows. Right? And there's such a big difference of like a model that performs better. And it's interesting technically, right. They'll probably have a big again, long term effect in the market. But yeah, I think this kind of like the panic that's going on right now I think is pretty funny. I don't think that most people who are using OpenAI and Frothic today is going to switch over to Deep Seq magically within the next couple of weeks.

I'll tell you just. And again, I'm the least smart, but my gut, just from my little portfolio, a little slice of the world is, I think cost is less important in B2B in some cases than that you can use more. Because when I look at a couple companies, one, one I invested in the contact center, which is all about AI agents called Gorgeous Free Commerce. They're at almost 100 million. Okay. At first, you know, the AI was a million bucks a month, right? To deploy these agents. Now it's fine, right? They've optimized it, right? And then I was a small investment at the low end of video in a company called Opus Pro, Opus Clip that Victor probably knows. And when I invested, I'm like, this company's got to be burning. I mean, you're uploading billions of videos and you're, you're creating clips for free. Like this business model can't work, right. And I look and when I met, oh, it's actually cash flow positive, right. And it was wildly expensive. But as soon as they made huge commits and optimized what they're doing and at the corner, maybe even cut a few corners. Not literally. I mean, it's a great product, but maybe didn't have to do everything, right. They don't render all the videos in real time. They adapted. So my thought is a lot of B2B folks. I know, I don't think Salesforce's gross margins are going to plummet to 20% because of Agent force, but we might be able to make these products in one year, like ten times better. Right? Whether it's the getting rid of the last bit of the canny valley or giving agents out for free. Like, you know, when I, I, you know, you guys probably know this, but when I, when I talked with Brian Halligan the other day, I didn't realize Dharmesh. I mean, right now HubSpot isn't charging for their agents, right? And this is a related point. I don't know what you, you think, Tomas. I think what if everything gets better and cheaper? We just might not be able to justify $2 for a resolution. It might have to be included.

You think it'll be bundled because it's so inexpensive?

HubSpot's not sure they can charge. Marc Benioff is. But it's early. It's early. Customers aren't stupid. And I think we've all gotten ripped off the last two and a half years with endless price increases. Endless price increases. And I think another one, now you're crappy. Like, if your agent's like mediocre, I ain't going to pay for it. I think it might be a VC fantasy. Just like the fact going to Victor's point, just like Deep Seq has changed the world in 48 hours, it might be a VC fantasy that every B2B company can charge 50 to 70% more because of these additional per resolution charges. I just don't know. But I actually think it might be deflationary in SaaS for the first time.

I think it's much more difficult for income companies who are adding on AI functionalities that they need to charge for to not, you know, erode their margins. Essentially, it's much easier for a startup who's built a product where it is the product Because I think, I think ultimately you don't pay for like the models. Right. You pay for the product. And I think it's just for agentfall for some of these big things. I think frankly I'd also say a lot of them, I don't really not sure they figured out exactly where this stuff is valuable. Like there's a lot of like hey, we're doing like cool things and everyone agrees that it's cool but does it actually impact your business? Whereas I think some of those smaller native companies, I would put ourselves in that category have actually found a very real problem. We deliver very, very real business value. And then you know, it's kind of built into the, it's built into our business model already.

Right.

But I definitely think it's like Copilot. Right. You really got to pay a lot more for Copilot for your employees. Like clearly that seems to not be the case for a lot of big companies because they just can't pinpoint the value.

Yeah. I don't know. What do you think? I just don't. I'm just trying to learn in real time. I don't know. I, I just don't know. In a year if everyone will be able to charge another 50% for enterprise applications for their AI add ons and agents. They may be forced to, especially if the cost goes down. Another. I don't know exactly how the economics really work at Deep Seek but if it's really an order of magnitude cheaper. Right. How long, how, how often can you charge two bucks for, for what costs a fraction of a cent to deliver?

Yeah, maybe but like software has never been cost based pricing, right? I mean Twilio. Okay fine. They stack a margin on top of the SMS cost to the underlying stripe. Stripe. Okay but, but like a lot of.

APIs are cost based but keep going. I'm, I'm, I'm with you. I'm with you.

I mean like gainsight, you know they're not marking up AWS storage. Right. Or like compute. So I hear what you're saying I think but I do think the point that you made at the beginning I completely agree with which is like if Deepseek like models with great reasoning, 95% cheaper.

Yeah.

Software companies will just like 10x or 100x the use and probably keep the margins the same to get to a much better user experience as a way of differentiation.

Right.

So I think that the UX our expectations as users for what these things are going to do are going to go way up because they become increasingly sophisticated. And like if you play with deep seek, I was trying to create a flowchart. I took the deep seq paper, the academic paper, and I put it in a deep seq and I said, create a flowchart for me of what they did. I think it's just hard we could read an academic paper. It spent two and a half minutes thinking and I was watching it. At first it said, okay, like the user said create a single chart, but the experiments actually have three branches. So now I have to decide like, do I create one single chart or do I create a chart with three different branches? And it like went back and forth, back and forth, back and forth. And now I understand. Okay, well next time I ask it to make a chart, I need to be clear on this point. Just the same way that we learned how to use Google, we're learning how to use these models. And this is one of the first models that narrates the way that it thinks. And I, I think that way we'll start to get to more outcomes. And then I think the other question that's really relevant this conversation is, are we selling outcomes now in software as opposed to selling seats? Yeah, and I don't know the answer like, but the mantra has been we're selling outcomes, we're selling outcomes, we're selling leads, not, not SDR seats. We're selling resolved customer support cases or videos or, or clicks. And if, if that we do get to that place, then I think it doesn't matter how cheap these things become because there's some break even for a customer to use the AI rather than my limited.

You know, it's funny, I, I dug up, I have a post coming out up in my queue, but I dug up, I went back through a bunch of those old KeyBank SaaS studies, right? And it turns out going back to the beginning, per seat was less than 50% of SaaS revenue.

What? Wow.

When you add in API pricing, other pricing, just because we think everyone talks about blah, blah, blah, Salesforce, it doesn't mean it's most of software, right? And so it was like 47% in like 2020 or 2021. Okay, so I'm not saying it won't continue to decline, but VC shooting from the hip on social media saying the seat is dead, the seat was never was was at best a plurality of revenue. And, but I wonder, I have just one investment I've made where the customer was playing in kind of a hybrid model, right? And listen, this is not like the most profound Insight but across a million bucks that they were paying very quickly. And of course what happened the next day. Hey, hey, Victor. We love Synthesia but a billion bucks. We need a flat ranging like no more of this like variable. It destroys the enterprise. No enterprise, no matter what. And maybe you guys both have insights. Enterprises still want visibility. There is the ability to move some budget around. There is ability to take budget a piece. But everyone wants certainty, right? If everyone want. Everyone's. Everyone wants Snowflake as much as they can in their Snowflake spend. They want Snowflake here. Right? So I don't know if this is as radical as the Internet wants it to be. How do your customers want to pay, Victor? Do they want to. Do they want to pay in brand new ways or they want to pay in the same way their grandfather paid for business offer?

I mean we still sell seeds predominantly and I think, I think it depends just a lot on the product, right. I think the way to think about Synthesia right now is PowerPoint 2.0. Right. And like PowerPoint is one of those things where like, you know, we have thousands of people using this inside, you know, big enterprises. And I think that's a, that's like, that's, that's easy to understand why we're selling seats. I think, you know, we also want to sell outcomes. You know, we are building kind of more specific workflows that solve like, you know, reduce deflecting customer support calls to the call center or increasing the efficiency of sales prospecting which we kind of like build separately. But I think it just, I think it really just depends a lot on the product, right. If it's. I think there's probably a lot of companies who kind of over indexed on seats where it doesn't really make sense in a creator tool. I think seats make sense, right. But a whole bunch of other types of tools where seats maybe isn't like the right. Is. Isn't the right. But I don't do.

Yeah, I don't know. I want to move on to fundraising. I just, my only thought is for founders and others, I just think just got it. You just. I would just be a little cautious on social media think because I don't think most business customers want pricing that is radically different than their last product. Right. If I paid this much, if I'm paying 300 bucks per month for Salesforce and I'm moving to, to this new version, like 200 bucks seems cheap, but you want 83 cents per contact resolution. I, I mean it's Just it's. That may add friction to the sales process. Right. And there are certain ways and if I'm. I think of everyone that's like Stripesque prices. Stripesque that I've seen. Right. And we may, if you're. If. And I think we may be playing. Spending too many mental calories and playing too many games on pricing when we should focus more on closing customers in a low friction manner. Right. I think this is over, overdone this issue. Right.

I think the deeper insight here, which I, I have confirmed so many times over the last years is just to not over index on social media think, right, like of what VCS want or like what I want as a founder. Like just talk to your customers, listen to what they want, help them deliver awesome value. The rest will take care of itself. Right. It's a bit like, I think with all this like model stuff, it's like most customers don't really care about models. Right. They buy products. And I think in the tech world we love talking about technologies and whatever. It's like agents latest like hype cycle. But when the rubber hits the road eventually you can't just live on like buzzwords and, you know, kind of grand ideas.

Yeah.

I think that that's always, that's a big lesson for me. The last eight years for sure.

Okay. I want to spend just a couple minutes on the overall VC fundraising because I have both of you. Right. Victor's been at this since 2017, before the buzzwords were cool. Just raised what I think is a real round. Right. 2.3 billion or whatever it was. That sounds like a lot. But you're not at 2.3 million in ARR, right? I mean you haven't disclosed, I won't ask you, but you're on one side or the other of nine figures in revenue. Like I think they got a good deal.

But. Okay, so I want to ask the best risk reward.

Great deal. Great. Seriously. So to us, I stole this chart from eny, which stole half their data from Crunchbase, which probably got it all out of Deep Seek and OpenAI. Anyway, so we're all stealing each other's data, but this isn't mine. But I like this version of what we've seen before. Even though, which is what happened at the end of last year is money went way up, right. As we can see on the left, which we all saw at least on TechCrunch. Right. But deals didn't. Deals went down. Right. A lot of it was growth focused and half of it was AI focused. But this Says to me, if you're, if you're in the hot zone of Synthesia and we. Victor, in a minute you can tell us what hot is. It's, it's, it's the good. It's as good as, almost as good as 2021. Right. Maybe it will be better, I think, this year, but overall deals are down. Is this what you're seeing? And so does this mean we're in a real world where the folks that are saying fundraising is harder are right and the folks that are saying it's froth are right? Is everybody right?

I think everybody's right. I mean, you look at databricks raising 15.

Yeah.

You know, I mean, that's as big as the Facebook IPO was, which was the largest technology IPO at the time, in 2014 or 2015, whenever it was. And they did that in the private markets, right?

Yeah.

Raising 5 billion. So there's, you know, you have 20 billion, let's say of that 60 billion in Q4 going to two companies, a third of the dollars. And so it's really like what you're seeing here is the early stage deal counts, I think, you know, probably the same. The growth stage deal counts are down in a pretty meaningful way. After 2022, the Series B through the D market was effectively dead. And it's starting to come back. But, you know, if you're, if your check sizes are measured in the billions now to lead to financing, you can't invest in many companies.

So for, for. And what's your pulse for your average. And even this is top 1%, right? Or even higher. But what's your pulse for. For the classic B2B triple, triple, double, double company, which was what everyone wanted to fund in 2021. What's your pulse on that in 2025?

I think it's a. It's like a lower multiple A. I think it's like a very reasonably priced investment.

But the deal gets done. But they all get done. All the triple, triple, double doubles get done.

No, I don't. Not even. I mean, maybe on the margin, kind of depending on. And depending on the market. I think the hard part is those triple, triple doubles. In classic software, there's a lot more competition than there once was. Now all of a sudden you look at a company in a particular space, and the last 10 years, you know, you and I have funded a lot of those companies and many of our friends have funded those companies. And so, like, if you're tripling, tripling, doubling, doubling without AI, it's It's a hard sell.

And then that's the thing with AI. Like you used to have two competitors, now you have 400. I can't even keep track. Like I can't even meet with a startup that's like precede whatever because there's like four. How many, how many other AI legal in house litigators could there be? Like this was the most boring category when I invested in legal in 2015. Now there's a thousand startups, right?

Kind of the groupon era for B2B. Remember that era Groupon, where like Groupon came out and then there were a thousand Chinese competitors within like six weeks? Yeah, a few hundred in the US it's kind of the Groupon era for AI where one company takes off and then there are 15 to 20 others because you're wrapping the API, you have a lot of capability out of the gate. And then long term product differentiation probably matters less than go to market execution.

Yeah, the products are superficially great now, right. Versus they used to. All our products in the old days, the first 18 months were terrible. Like they had one cool thing, they did one cool thing, everything else was terrible. Now these products, at least superficially, like you, you talk about AI agents, how you know, people can't get ROI from them, but superficially all, I mean, the AI sdr, superficially, all the products are great. Like in a quick drive by every AI SDR product's great, isn't it?

The demo is amazing.

Demo's amazing.

Demo's amazing.

That was amazing. All right, Victor, what did you on this slide? Was this the easiest round to raise?

It wasn't the easiest round to raise, I think, I mean, at the valuations that we are in now. Right. And especially when you have a really good business, which I think we do. Like, not just from like amazing Vision, great start, but actually numbers. Customers expand their contracts. The more data and numbers you have, the more you will get evaluated in those things. Right. So I think there's these very outlier deals where you're like dev in AI or something and you're like these like six engineers is absolutely insane. And they're going to change the entire world. Coding, it's like, boom, $2 billion valuation. You can do that maybe if you have a really strong story and there's team and whatever, but I think those are still pretty outlier. My sense from like also speaking to peers is that when you're raising growth rounds now, and you know, we're not a foundation model company, we're very applied, we're definitely evaluated like a SaaS company, definitely with some premium because we're kind of, you know, very AI native. But I think it's a fair price, I think it's a good investment. I think the risk reward in this round is the best it's ever been. I think we raised the series C. You know, that was kind of coming out a lot of like hype cycle, you know, chat GBT had just dropped, everyone was like freaking out and we were growing super fast and we were closing a lot of contracts. Right. But it was still to be determined, like can we get to million dollar contracts? Will people actually get consistent value out of this? Are they just trying it out? Is it innovation, budgets? All of those questions were still kind of open. I think we raised this round. What I think stood out to the market here was that not only are we good at closing new logos and closing new business, but we are very good at the renewals and the expansion and ultimately that's where your customers vote. If your product is just a cool demo of which there's a lot right now, or is it actually something that derives real business value and my sense from spending time with a lot of investors, right, is that a lot of. There's a bit of fatigue of like, okay, great, you grew really quickly, you closed a lot of contracts. But that doesn't necessarily mean that that translates into lasting value. I think there's this weird thing in AI right now where it's very fear driven and people are very willing to part ways with their money, both on consumer side but also in businesses to try out new things. Right. Because everyone is like scared that their business is going to completely disappear because OpenAI is going to kill them next month. They're afraid to lose their job if they don't have an AI strategy, if they don't appear to be an AI expert. In reality, I think most enterprise buyers don't really know what they need. They don't really understand the technology. So they tried lots of different things, which may be a sound tactic. Right. But it means that there's a lot of like this demo budget that's kind of sloshing around and I think that's one of the things that stood out to investors in this round.

Well, it's interesting how important durable revenue was for the round, right? That it's durable is that Tomas. That's another thing on the, on the VC social media. Are folks still anxious that so much of this revenue is discretionary, that it's experiment, that it won't stick? That it's non durable to Victor's point. Or is that fading as a concern? I.

Well, I still think, I still think it's a concern. It's probably not as much of a concern as it was last year. Last year buyer preferences were changing so fast. I mean the underlying architectures were changing, the models were changing in a really meaningful way. Are we doing keyword search, are we doing rag different kinds of databases? We're trying to figure it out. And as preferences change, you had whole categories come and go within the span of a year or 18 months. I don't think we're quite there yet. I think where we are, particularly at the application layer is trying to figure out which AI agents actually produce value. How much am I willing to pay for a note taker? Right. Leslie's note taker just joined the waiting room. Right. I wonder how much he's paying for. It's like five bucks.

How many do we need? 100 note taker apps. What's your sense?

Actually a friend of mine tweeted, he said this is the. He attended a meeting this week where there were more robots than there were humans. And one person didn't attend and just sent their note taker. And I don't know if you've done this but like sometimes I want to listen.

But look at this call, look at this call. There's at least like 20, 30 note.

Takers tries to boot them, but they keep coming.

Yeah. And then you, so you know, you can attend a meeting virtually, I mean whatever, bionically, so to speak.

Yeah.

So I think the question is like okay, how much are you willing to pay for that? We'll zoom, bundle it in, we'll Google Meet, bundle it in. And so is there price erosion there? And so maybe that kind of creates turn, but I don't think there's sort of this like category cataclysm that maybe we saw in 24.

Yeah. All right, well let me tie this to the last point I want to give on and then if we have time we can take some questions. So folks, I don't know if folks have put questions or they can put questions in the chat. We'll try to do that with our last minutes. But this ties to like a meta question I have. So one of the questions last year was is this all experimentation budget, will it fade away? Is it durable? To Victor's point. Right. Victor had to prove that he has triple digit NR and all the things. Eventually all these companies have to converge to real software companies, probably IPO and everything. Right. Then where I'm really getting confused is on agents. I'm not confused about the hype and what they can do and whether our agents can all talk to our agents and our agents. Agents. That's going to be. I think it's exciting, right? I'm just wondering how many of these we can pay for. How many of these can be. And I just looked this morning. You know, Dharmesh from HubSpot has a little AI agent. He's got a bunch of things on his network, but he's got a little marketplace which I'm sure in six months will be an order of magnitude larger.

Right.

He's got 629 agents, right? Here's Salesforce charging two bucks. But this was the one on the bottom right is the latest data from Zylo. And they're all fairly consistent, which is basically over the last year, people didn't add any net apps, they didn't add any net apps to their stack. Right. Whether that means they're actually adding some but consolidating on their core apps. Right. I think, you know, I should have known this, but Victor, you can do it. I think Synthesia is a swap, right? It's going to be a swap in some cases, right? You're going to swap. It's not a total. Always a new app. You may be swapping out a training app, you may be swapping out part of the Adobe empire as you go, right? It may not, but. But how many can we. I believe that the. All the energy in venture, in startups, in yc, in SF is somehow based on this idea. We're going to pay for like three to four times more agents. And so we're going to like triple or quadruple our app stack. Can we. Is it true and can we process this many paid agents or is this all a big VC hype cycle that's going to implode because we can't pay for 500 of these agents. What do you. What do you think first, Hamas Is this. Does my question make sense? Is where I'm confused.

So I think, I think we see. I mean, we're seeing consolidation across the SaaS stack, where you just have bundling everywhere. Like you look at the sales stack, you see massive consolidation across SDR automation. So I think you'll see a reduction there. I think people will end up buying agents for different reasons than they bought classic software. Like, for example, we're investor. Like if you're a large Enterprise, you have 641 apps, you probably have some Pretty significant security apparatus. You have another 75 security products. Those produce 8,000 alerts. Less than 1% of those alerts are reviewed by humans. Now that you have to review all of them, people aren't going to buy additional like five other pieces of software. They'll probably buy like a hundred agents. And those agents will do the job of the humans.

They're going to pay for each agent 10 or 20 bucks a month and they're going to manage them individually. The IT team or whoever is going to have a whole nother set of 200, 300 agents they have to manage.

Yeah, I think.

Well, I'm not saying you're wrong. I'm just trying to learn actually.

Yeah, yeah, no, I think that's right. I mean you think about like BDR of the future, right? BDR today manages one Gmail inbox with max 40 outbound emails. Maybe they manage two or three BDR. The future will be managing 40 or 50 Gmail inboxes. And so you know, I think like if you think about like there's a deflation in the number of seats because now all of a sudden BDR acceleration, well I don't need nearly as many BDRs but the value per seat goes up in a pretty meaningful way. And so I think maybe what we see is application count stays flat or maybe even decreases, but the total amount of software spend increases because it's capturing some fraction of that labor spend.

But are so that, that's a. I get that and I can't predict the future, but aren't if you just think about it from an old fashioned enterprise, got to manage X vendors, got to rogue renewals, rogue increases. Like do I really want an explosion of five times as many apps? Whether you call them agents, they're still apps from a, from a procurement IT process, aren't they? Yeah, still another goddamn thing I got to evaluate. Do a security audit, do a cost benefit analysis, make sure it doesn't go rogue. Like everyone went rogue in 2021. About 50 sales apps. Right. I is I just feel that the cognitive load is high. The co not for the end user but for the buyer.

Yeah, I think the successful software applications, like whatever. As a salesperson I might have 500 agents each of which is managing one lead.

Yeah, you could. Right.

And so what is that agent doing? It's gathering the news and the social media and the podcasts and transcribing it. And that's pretty easy to review. I just go through my list like what's the latest with databricks what's the latest with Snowflake? And each one of those is an agent, so I don't think the cognitive overhead is huge if the UX is correct.

But who pays for it? That I don't think for the. I think the bionic. I call it the Mech ae. But the bionic sdr, I believe, is happening fast. Right, but who's. I've never found a single AE on all of planet Earth or even our galaxy who will put anything on their own credit card. I've never found an ae. So the company has to pay. I've never found a single sales rep, maybe in McMurdoc station, that will pay for their own sales. But they won't. They got some. So who's going to pay for their ad agents? If they're discreet, if they're not bundled into another. Another app. Right. If they're not part of a platform, who's going to pay?

I. I think it comes from the sales. I mean, you've seen the sales budget. I don't know, 10 years ago, what was the sales budget per AE? Maybe 250, 300 bucks today.

Exactly. Exactly. I think. Yeah. Right.

And so. And then 2022, what do you think it was? 750, 800 bucks, maybe a thousand.

Yeah, it doubled.

Yeah. And so Salesforce is half of that with Einstein.

Right.

175 base sales seed, 500 to get with Einstein. And so I. I think you see some, you know, you see consolidation, compression within the existing sales stack, and some of that budget shifts to AI.

Okay. I don't know. I want to. I. You. You think about this much more than I do. This is just a meta. Worry for me is that no one's gonna. Enterprises are gonna be fatigued reviewing 200 paid agents. Not if they're part of my stack. Not if they're part of Synthesia, for. For content creation, not if they're part of HubSpot. But 200 new vendors is exhausting. What? My limited experience, both with my portfolio as a CEO and my brief experience in a big enterprise is. There's a. There's just. There's only so many vendors you can bring in. And there are moments of time, like 2020, when the world ended. Right. And there are moments in time, and there are always experimentation, budgets. If it's isolated, right? If it's isolated from risk. But when there's risk, I just worry there's. That. That we're not thinking through how we're going to get these through the CIO's budget, right, the CIO's budget. And I also don't think SMBs want to pay for 100 agents on their own. I see SMBs being cheaper than ever today. They're cheaper than ever, right? The SMBs do not want 200 recurring things on their personal credit card.

But why do we. I don't understand this. Agents talk. Can someone clarify, Is this like just features that we're now calling agents or is it platforms or like I don't think that we'll think of like we have like 200 agents, like researching social media on behalf of our customers. Like you'll have, you'll buy a product that does that for you. Maybe it's part of your existing stuff.

Well, maybe that's the question I'm asking you too. I think if I'm on, if I'm on, yeah, there's 629. I'm going to find. I'm going to deploy a hundred of them.

I mean, I don't know, I just think it's such a weird, it's a weird way to talk about software and features. Like I understand. It's like it's.

Well, you're at the cutting edge. You're supposed to tell us this is what's happening. You're the funny daddy on that.

You know how I got here, Jason? I got here by not listening to the buzzwords, you know, and just like great products, I love. It just weirds me out, all the stuff. It's like it's features, man. It's like it's an LLM driven feature that does something for you. Why are we trying to anthropomorphize it to be like an agent? Like I understand like it's sell to the marketplace and it's like it's cool. And in some instances maybe I can understand why we call it an agent, but I think majority of this is just weird. I think in five years time like I think everyone's like, why the fuck did we spend five years talking about like algorithms as being like a co worker? It's just like software that does things for us and sometimes maybe you want.

To chat with it.

That's great, that's a new interface. But I really don't understand this like obsession with agents. And that said, you know, we're probably launching an AI agent strategy soon because everybody likes to talk about this stuff, right? Nobody wants to talk about features. So I get it from like a go to market and sales perspective, but it strikes me as well.

But it'll be part of your platform. You have thousands of customers. So I don't have to be.

That's like weird to me at least.

No, no. And then, and I don't know if we have any questions to take or I could wrap up with the last minute. I don't have the answers. I'm challenging it. I just, I just, I think tomorrow's. Your point's right. In 20 into, in second half of 2020-2021, somehow we magically found budget for all these new apps, right? And the pandemic did it, right? I mean, and if you saw like, I mean the craziest one in my portfolio was Talk Desk, which is call center like. And Forget about how AI changed in 2020. You couldn't go to the office for the call center, right? So everyone in their space like they, they grew 5x in six months because it changed the rules, right? The, it changed the rules. And I think there are some rule changing happening, but I don't think in 2026 it can double. I just think an agent counts as an app potentially if it's a vendor. Let me put it, maybe I'm rambling too much. Every new vendor in the enterprise's cognitive load, a new vendor to put into the procurement system, to get approved, to track. And every enterprise knows that if I bring in one, it's not just one year for Synthesia. Now I'm stuck for eight years. Like that's how enterprises think. They don't think one year, they're like, okay, it's going to take me the first year I'm learning, the second year I'm rolling it out more, the third year I'm going to buy more stuff. And they always like double. Back at Adobe, like when you put any vendor in the system, you doubled the budget because you knew it was going to grow with add ons and seats, right? And it was. And so how many of those can you add each year? Even at Adobe size, you just run out of vendors. You can. And I don't know if AI change, if agents change that rule, they're going to change a lot of other rules. And so I don't know who's going to pay for that. I just don't know who's going to pay for the discrete vendors. Not the agents themselves. But so many vendors, so many vendors.

I do think they're like, there are fundamentally new product categories though I would put us in one. Like, we're never going to replace someone or take budget from someone. We probably will over time.

Don't come from the training budget or the LMS budget if you're for an internal, for an internal use case.

No, we'll sometimes take some of the video production budget that they'll go that use with agencies.

Yeah.

But the key point here is that people are not evaluating us against. Should we switch out this thing with some these here. Right. It's a net new thing. It's also why we're growing so fast. And I think there are new product categories like that and then there'll be a lot of these agents or features or whatever. They'll exist better within, you know, the platforms people already use and you know they'll be kind of add ons and extra modules I think.

But I believe you that you listen, you know, you're in all the deals. I believe you that you're not directly stealing someone's tricky old budget. But what I, my limited experience tells me behind the scenes, you're stealing someone else's budget. They're canceling someone that they don't quite need. That was on the bubble and they. This is, I mean I, I don't think this has changed since I worked at a Fortune 500 tech company. You get together each year.

Okay.

This is why budget's annually and Tomas, you want to add that cool product, what are you going to cut? This is why so many things got cut.

Maybe some of the budget, maybe some of the budget does not come from software. Right. It comes from like services based things. In our case, a lot of the budget we eat into is like video production agencies. Right. That's not so far vendors or translation budgets or it's kind of like more service driven things. And I think especially if we talk about agents. Right. That would probably be a lot of what that could lead into. So it's like you may add another software vendor but maybe the budget doesn't come from like other software platforms but, but it comes from like services.

That's a lot of the hope on X is that we can turn humans into software. Budget.

Morgan Stanley ran a study in Q3 I think and they said 50% of the a budget was cannibalizing existing software and 50% was new. 50.

50.

Yeah, that's probably right. Right. I mean they got the data right. Yeah.

And so I bet Victor is right. Like it's translation or other kinds of services. Consulting, customization, legal like all that stuff like legal outsourcing. That's where the software budget's coming from. It's eating away at the labor cost.

Yeah. So that's so you Think. And then, Emilio, do we have any good questions or should we. I know, I know we've gone long, but we might have lost you. Do you have a lot of comments? But we also have another session in like two minutes. Okay. We might have to, we'd have to wrap up and, and do them later. That is the 50. 50. So the answer like a lot of these things is yes. Ish. Right. It's both. Right. We are and where and tomorrow is just maybe to wrap it up. If so, 50% is cannibalization. Maybe Victor doesn't see it, but they're cutting videographer, they're cutting something else. Right. The 50%, that's net new budget. Where's like the fortune, like the GDP is still somewhat fixed in the United States. What's it growing? 3% a year, even under our new regime. So, so for real, where's the money coming from to bet where, where they get. Where does Morgan Stanley or Theory Ventures say where are we getting this money and how long will it last?

I think it's labor. I mean, I'm seeing it in our portfolio.

Right.

Like I look at R and D spend and like year over year, R and D growth compared to 10 years ago, we have one company growing really fast. Engineering headcount year over year will be flat. Yeah, because they deploy some AI enabled ID and they can write a lot more software. And so instead of hiring another, say 10 software engineers at 250, 300k a year, 3 million in spend, they're starting to spend, I don't know, a hundred thousand dollars a year on AI software.

Do you think that's true? From what you see, Victor, do you think we can do more with fewer engineers, with AI and the new world, or is that a bit of, a bit of a myth?

No, I think we can, but I think there'll be many different shapes of companies. I don't think there'll be one type of company where you really want to go for it. I still think if you want to build a $100 billion company, you're going to need a lot of salespeople, you're going to need a lot of engineers. But I think there's no doubt that productivity is going through the roof. And it feels like we are seeing a lot of these types of companies, as Thomas is saying. Right. Where you can. And also it feels like the mindset has changed a little bit where there's kind of a reluctance to hiring more people and just being more efficient, which I think is super awesome. But yeah, I think it's never black and white. Right. But I think that's a definitely new type of company, which I think is super cool. But if you want to like, tackle the enterprise like we are, I mean, that's. That's still very difficult to do without like adding significant account.

Yeah. You might even. I mean, if we were on VC Twitter. The way to take it to the extreme is the new vanity metric is ARR per employee. Right.

Like, well, ARR per engineer is more interesting than AR per employee. I could tell you why. Per engineer, per developer.

And that's like the sexiest metric.

It's like.

I think it's kind of one of the coolest. We're 10 people and we're generating 20 million in revenue. Like those kinds of ratios we wouldn't have seen.

Yeah.

A decade ago. And now, you know, people are striving for it and we hear from founders. Like, we, you know, we only have this many people. We don't want to hire people. We're raising capital, but we're not hiring. That's unusual. That's. That's a very different pitch.

Do you think I'm making this number up? But I think it's about right. And Victor could probably for a case study and then maybe we can break. That makes. That's what I see too. Right. My. My endless in the world's changing so quickly today. Right. I even did whole deep sea thing. It feels like everything's faster than it was a week ago. But it feels to me there's still the issue around 200, 300 employees where you still end up needing 10 people to do everything. And what I feel like this 10 people can get to 10 million. ARR thing, it just shifts the time. Like instead of me needing. But it's still at 2, at 100 million, at 50 million. ARR. I need so many humans. And honestly, so many mediocre humans. You start having to hire. Okay, maybe that's the wrong term. You start after hiring A minus tier and B tier. No matter. Even though you can't say it out loud. And it just takes so many people to do some of the basic stuff. And you need so many salespeople and so many mediocre renewals people. And I just see everything still gumming up today at that size. Maybe if AI gets rid of that roadblock, that'd be awesome. But I wonder if it just shifts. Kicks the can down the road a year or two. Yeah.

I mean, it's kind of like Salesforce hiring a thousand salespeople to Sell their SDR salespeople. Right. The agents. I think there's still a lag. Like I think we'll, I think it'll be definitely be more efficient. But I still think that we're far from you being able to. At least when you create true enterprise software. I do think that's a bit different than more consumer or SMBs. But you don't need the human touch. But it still feels difficult to close. It'll be very interesting if a company with 20 employees, whatever gets to close million dollar deals with enterprise. I think that would be a really interesting kind of tipping point. But so far for most of the ones that I've seen at least is still a lot of like, you know, self service credit card revenue or like, you know, kind of smaller sales deal. Because it's still just very difficult managing a deal desk. Right. It's like you just need people for that.

Well, maybe let me just wrap. Let me ask one last version of this to you, Tomas, then we could wrap and this was great. So when we start, when you and I started to, a lot of VCs would yell at founders and say you've got to offshore to save money. You've got everything told that the magic solution when we started, maybe you too, Victor. The magic solution with VCs was have set 50 or 60% of your India offshore. That would magically cut your costs. Right? Magically. Because developers are fungible, they're all the same. So just hire a bunch of folks in some country you've never personally visited. And that's my VC solution is the new version today. The version of today is if you're good at AI, you only need 10 of developers. It almost feels like it's the new version of offshore is AI, is the new Offshore like you, you got you. Why do you need more than 10 guys?

I love that. I love that analogy.

Yeah, that's a great, that's a great. That's tomorrow's blog post for you, I hope.

Jason.

I think like some people did offshoring really well. They hired a great country manager. They really spent the time to transfer the culture.

Yeah, yeah.

The cost efficiencies. And then some people basically just, you know, mailed it in and you kind of got what you paid for. I think it's the same with AI. If you change your recruitment processes and you look for people who really understand how to prompt these systems really well and think about building with AI, I think you can drive a ton of efficiency. I think if your CEO has been told by VCs. Hey, go employ AI within your engineering team and you buy a bunch of people some subscriptions.

Yeah. Cursor is the answer.

You have to change the way that you work and change the way the teams work, and that's really hard.

I also really still think that what I see across, no matter what task we're talking about, where AI really shines, is still augmenting humans. In the case of us, we augment people to make big videos. Cursor works so well because it puts the human in the driving seat and just makes you more efficient. I think this, like, pipe dream of agents, like, just doing things completely autonomously, in my view, is still. Still a while away.

Yeah, we'll see. We can break my limited experience is that an S tier agent is better than a C tier employee. This is what you see across the contact center is you usually see that the agents are like in the. They can't do everything, but they're in the top 10% of CSAT because what they do, they get done without complaining and they don't argue, but they can't be below. I think the whole world' going to. That agents will replace the. The C tier, like very quickly and as. And deepen the B tier as they can. Right. And I don't know. All right, guys, this was great. We ran out of time. Victor, so great to have you back. We'll see you in London again and Tomas will see you at the next one, my friend. Thank you.

Thanks.

Thanks, guys.

Thanks, guys. We'll see you for the next session.

It's in the chat if you want to see us there.

Thanks for joining AI Day.